Sat, Aug 16, 2025 page9

• Japan GDP growth hits 1%, beating expectations

  • Bloomberg
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  Japan’s economy expanded faster than expected last quarter, led by solid domestic demand, boosting the case for the Bank of Japan (BOJ) to raise its benchmark rate again this year while giving embattled Japanese Prime Minister Shigeru Ishiba some rare good news.

  Gross domestic product grew at an annualized pace of 1 percent in the three months through June from the prior period, surpassing economists’ forecast of a 0.4 percent gain, the Japanese Cabinet Office reported yesterday.

  Authorities revised the previous quarter’s results to 0.6 percent growth, reversing from a preliminary contraction.

  

  The Tokyo skyline is pictured on Thursday.

  Photo: AFP

  Gains were led by business investment, which rose 1.3 percent from the previous quarter, surpassing the consensus estimate of 0.7 percent growth. Private consumption nudged 0.2 percent higher.

  Signs of stronger-than-expected resilience in the economy would likely encourage views that the central bank would hike again this year. While the BOJ is expected to hold steady when it next sets policy on Sept. 19, some 42 percent of economists surveyed by Bloomberg anticipate a move in October. BOJ Governor Kazuo Ueda last month said that authorities would keep raising borrowing costs if they are confident domestic demand could stay steady.

  “I had been expecting a rate hike in October, and I feel like the chances of that have gone up a bit,” said Atsushi Takeda, chief economist at Itochu Research Institute. “The market consensus also seems to be shifting toward an earlier hike now.”

  “Japan’s surprisingly strong second-quarter GDP bolsters the Bank of Japan’s case for a near-term rate hike, providing evidence that domestic demand is holding firm despite higher US tariffs,” Bloomberg economist Taro Kimura said.

  Yesterday’s GDP figures are the first to reflect the impact of US President Donald Trump’s tariffs and auto levies, which took effect in April. During the period, Japan faced a 10 percent baseline tariff along with 25 percent levies on cars. A 25 percent tax on US steel imports introduced in March was doubled in early June.

  “Even amid all the uncertainty surrounding US tariffs, business investment has also been growing steadily,” said Hiromu Komiya, economist at the Japan Research Institute.

  Ishiba’s administration has said the car levies would be set at 15 percent, the same as the current baseline rate, once Washington adjusts executive orders in line with an agreement reached late last month.

  Earlier this month the government cut its real growth projection for this fiscal year to 0.7 percent from a previous forecast of 1.2 percent. The downgrade partly reflected a darkening global economic outlook resulting from Trump’s trade policies.

  Against that backdrop, the economy’s show of resilience in the April-June period would provide some political relief for Ishiba, whose ruling coalition lost its majority in the upper house in last month’s election partly due to widespread frustration over the persistent rise in costs of living.

  The third quarter might reflect a bigger impact from tariffs now that front-loading has stopped. Other risks to growth include persistent inflation, with data due next week expected to show consumer price growth remained well above the BOJ’s target last month.
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